Excerpt: - - the words 'undertake and execute',in section 1, clearly apply only while the contract is executory; and, though the other words 'hold' and 'enjoy' are more general, it seems to me they refer to holding a contract or enjoying a contract which is executory, that is, a contract under which something has to be done by the contractor, either one act or recurring acts, and that he is only disqualified 'during the time that he shall execute, hold, or enjoy' any such contract. the, words 'hold and enjoy' may have been inserted to meet cases where a contractor holding a contract did not himself execute it. the words 'during the time' clearly shew that parliament wag contemplating a contract which would endure for some period of time, and that during that period of time something should.....dixit, c.j. 1. i agree with the construction that has been put on sections 15 (1) and 22 (2) of the c. p. and berar municipalities act, 1922, by my learned brother shrivastava, j. i would only add a few observations on the decisions in bikulal v. state of m.p., ilr (1953) nag 245 : (air 1953 nag 125) and k. c. shanna v. ramgulam choubey, ilr (1954) nag 571 : (air 1954 nag 255). bhikulal's case ilr (1953) nag 245 : (air 1953 nag 125) dealt with the question of the president of a municipal committee incurring a disqualification under section 15 (1) read with section 22 (2) because of the vice-president of the municipal committee purchasing cloth from a shop belonging to the president it was held on the basis of tranton v. astor (1917) 33 tlr 383, that such a purchase transaction did not.....

Judgment:

Dixit, C.J.

1. I agree with the construction that has been put on Sections 15 (1) and 22 (2) of the C. P. and Berar Municipalities Act, 1922, by my learned brother Shrivastava, J. I would only add a few observations on the decisions in Bikulal v. State of M.P., ILR (1953) Nag 245 : (AIR 1953 Nag 125) and K. C. Shanna v. Ramgulam Choubey, ILR (1954) Nag 571 : (AIR 1954 Nag 255). Bhikulal's Case ILR (1953) Nag 245 : (AIR 1953 Nag 125) dealt with the question of the president of a municipal committee incurring a disqualification under Section 15 (1) read with Section 22 (2) because of the vice-president of the municipal committee purchasing cloth from a shop belonging to the president It was held on the basis of Tranton v. Astor (1917) 33 TLR 383, that such a purchase transaction did not amount to a contract entailing a disqualification as contemplated by Section 15 (1) of the Act.

In the other case the question that was considered was whether a person was eligible lor election as president of a municipal committee because he held a lease of certain municipal land and also entered into a contract of lease with the municipal committee in respect of certain other land. It was ruled in Sharma's Case, ILR (1954) Nag 571 : (AIR 1954 Nag 255) that Section 15 (1) contemplates a continuing, lasting or executory contract and not a contract of a casual or transient nature- In this case also reliance was placed on (1917) 33 TLR 383 (Supra) and reference was made to Royse v. Birley, (1869) 4 CP 296.

2. With all due deference to the learned Judges deciding these two cases I must say that in those cases the very material difference between the language of Section 1 of the House or Commons (Disqualification) Act, 1782, considered in the English cases and the language of Section 15 (1) of the C.P. and Berar Municipalities Act and the significance and effect of the expression 'while owning such share or interest' used in Section 15 (1) and of the words 'becomes subject to any of the disqualifications in Section 15 shall forthwith cease to be president, vice-president or member' occurring in Section 22 (2) of the Act have been overlooked. Section 1 of the House of Commons (Disqualification) Act, 1782, plainly meant that the disqualification attached to the contractor only if he is elected, takes his seat and votes whilst the contract is being executed by him. The true character of that provision was pointed out by Montague Smith, J. in (1869) 4 CP 296 at pp. 316-317. He said:

'I decide this case, so far as regards that contract, upon the ground that at the time of the election the contract was no longer executory, and nothing remained to be done upon it but for the Government to pay the price of the goods. Looking at this act of Parliament and the general tenor of it, I certainly am strongly of opinion that the legislature intended it to apply only to contracts of a continuing nature, such as contracts for the building of works, and contracts for a recurring supply of goods, though I do not say that a contract for a single supply of goods is not within the terms which are used. But to my mind it very plainly appears that the statute did not mean to disqualify a contractor unless the contract was in an executory state on his part, that is to say, that something remained to be done by him; and that in no other way can the act of Parliament be properly construed. The words 'undertake and execute', in Section 1, clearly apply only while the contract is executory; and, though the other words 'hold' and 'enjoy' are more general, it seems to me they refer to holding a contract or enjoying a contract which is executory, that is, a contract under which something has to be done by the contractor, either one act or recurring acts, and that he is only disqualified 'during the time that he shall execute, hold, or enjoy' any such contract. The, words 'hold and enjoy' may have been inserted to meet cases where a contractor holding a contract did not himself execute it. The words 'during the time' clearly shew that parliament wag contemplating a contract which would endure for some period of time, and that during that period of time something should remain to be done on the part of the contractor under that contract. The 4th and 5th clauses also point to contracts having some duration in point of time for the performance of that which the contractor was to do under them. I repeat that I do not say that, if there is a contract for a single supply of goods, that contract is not within the act so long as it remains to be performed on the part of the contractor, he having to supply the goods, and the Government having a right to find fault with and reject them'.

The language of Section 15 (1) is quite different. The words 'has directly or indirectly any share Or interest' standing by themselves apply both to a contract which has been performed and also to a contract which is executory. The relevant disqualification mentioned in Section 15 (1) is intended to restrain a president, vice-president or a member from placing himself in a position in which there may be a conflict between his self-interest and duty to the municipal committee.

A person who has directly or indirectly any share or interest in any contract with, by or on behalf of the committee, becomes disqualified; on the general principle of conflict between duty and interest. But in order that such an interest should make the person ineligible for election, it is necessary that the interest must subsist at the time of election, selection or nomination as a member of the committee. This requirement flows from the words 'while owning such share or interest' used in Section 15 (1).

Those words show that for the purposes of ineligibility for election what is contemplated is a contract which is enduring at the time of the election or which remains to be performed at that time. It is because of the use of these words that it becomes necessary to hold that for the purposes of ineligibility for an election Section 15 (1) contemplates a continuing or executory contract and not a contract of a casual or transient nature which has already been executed at the time of the election.

In the case of any president, vice-president) or a member becoming subject to this disqualification after his entry into office, there in no question of 'owning such share or interest' at a particular point of time. If a person has directly or indirectly any share or interest in any, contract whether executory or executed, he owns such share or interest for some time at least. If he owns such interest or share, he incurs the disqualification and as soon as he incurs the disqualification his office becomes vacant forthwith.

This is the effect of the provision in Section 22 (2) that the president, vice-president or member of the committee, when he becomes subject to the disqualification, shall forthwith cease to be president, vice-president or member and his office shall become vacant. Thus the moment the disqualification is incurred, the continuity in the holding of the office becomes impossible. For the purposes of Section 22 (2) it is not necessary that the contract should be of some duration in point of time.

All that is necessary is that the disqualification should be incurred after the person's entry into office. Section 22 (2) says nothing about the disqualification continuing only during the time that the contract is in existence and does not require that 'office shall become vacant' when it is declared to be so. No doubt, if any dispute or doubt arises as to whether a vacancy has occurred under Section 22(2) it has to be decided by the State Government, but this does not mean that the vacancy in the office Occurs when the Government takes a decision. In the context of Section 22(2) all that it means is that in the event of a dispute or doubt if the Government decides that the person concerned has incurred the disqualification, then the vacancy occurs from the moment the disqualification is incurred.

There are no doubt some English decisions in which it has been held that a councillor qualified at the date of his election who subsequently became interested in a number of small contracts with the council incurred the disqualification from time to time but that it ceased as soon as his interest in the particular contract terminated and that not having been formally removed from office he was entitled to subsequently act as a councillor: (see Lewis v. Carr, (1876) 1 Ex D 484 and Cox v. Truscott, (1905) 21 TLR 319). But these decisions have been criticised in later cases notably in an Irish case O'Carroll v. Hastings, (1905) 2 Ir R. 590, where it was said,

'This humorous alternation of recurring disqualification and qualification, if possible under Article 12, would enable the mischief against which the article was directed to be effected with impunity'.

3. Here, the petitioner incurred the disqualification after he became a member but before his election as vice-president. That being so, the order of the State Government of 10th October 1959 cannot be sustained in so far as it relates to the petitioner's removal from the office of the vice-president.

Shrivastava, J.

4. By this petition under Articles 226 and 227 of the Constitution of India, the petitioner Shri Ballabh challenges the legality of the order of the State Government passed on 10-10-1959, holding that he had incurred a disqualification under Section 15, Clause (1) of the Central Provinces and Berar Municipalities Act, 1922 (hereinafter referred to as the Act) and therefore his office as member and vice-president of the Municipal Committee, Piparia, has become vacant.

5. The petitioner was elected as a member of the Municipal Committee, Piparia, on 7-2-1958. He was elected vice-president of the Committee on 27-9-1958. On 10-8-1958, he conducted, on behalf of the municipality, the auction sale of an impounded calf. The bid was knocked down in favour of his father Motilal. The matter was reported to the State Government and, after giving a notice to the petitioner why his office should not be declared vacant, the State Government came to the conclusion that the petitioner is joint with his father and the contract of purchase of the calf by his father attracted the provisions of Section 15, Clause (1), and disqualified the 'petitioner from holding the office of member and vice-president of the municipality. Accordingly, the office was declared vacant under Section 22 of the Act.

6. The petitioner relied upon the decisions of this Court in ILR (1953) Nag 245: (AIR 1953 Nag 125) and ILR (1954) Nag 571 : (AIR 1954 Nag 255) and contended that the sale of the call did not amount to an interest in a contract within the meaning of Section 15, Clause (1), of the Act. The case was heard by a Division Bench and as it was thought that the view taken in the two cases relied upon by the petitioner required reconsideration, the case has been referred to a Full Bench.

7. The State Government has found that the petitioner is joint with his father Motilal. This is a question of fact and the finding of the State Government must be accepted.

8. The relevant part of Section 15, Clause (1), of the Act runs thus:

'15. No person shall be eligible for election, selection or nomination as a member of a committee, if such person-

(1) has directly or indirectly any share or interest in any contract with, by or on behalf of the committee, while owning such share Or interest'.

Section 22(2) of the Act is as follows:

'Any president, vice-president or member of a committee who after his entry into office becomes subject to any of the disqualifications specified in Section 15 shall forthwith cease to be president, vice-president or member and his office shall become vacant. If any question, dispute or doubt arises whether a vacancy has occurred under this sub-section, it shall be decided by the State Government, and its decision shall be final.'

9. In construing Section 15, Clause (1), of the Act in Bhikulal's case, ILR (1953) Nag 245: (AIR 1933 Nag 125) (supra), reliance was placed on the interpretation of Section 1 of the House of Commons (Disqualification) Act, 1782, in (1917) 33 TLR 383 and it was held that the sale of a commodity across the counter for a cash price is not hit by Section 15, Clause (1) of the Act. In K. C. Sharma's case, ILR (1954) Nag 571: (AIR 1954 Nag 255) (supra), the decision in (1917) 33 TLR 383 was again relied upon and it was held that casual or transient transactions are not the kind of contracts covered by Section 15. Clause (1). Section 1 of the House of Commons (Disqualification) Act, 1782, is as follows:

'From and after the end of this present session of Parliament any person who shall directly or indirectly himself or by any person whatsoever in trust for him or for his use or benefit or on his account undertake, execute, hold or enjoy, in the whole or in part, any contract, agreement or commission made or entered into with, under or from the commissioner of his Majesty's Treasury, or of the Navy or Victualling Office, or with the Master General or Board of Ordnance, or with any one or more of such commissioners, Or with any other person or persons whatsoever, for 'or on account of the public service, or shall knowingly and willingly furnish or provide in pursuance' of any such agreement, contract or commission which he or they shall have made or entered into as aforesaid, any money to be remitted abroad or any wares or merchandise to be used or employed in the service of the public, shall be incapable of being elected or of sitting or voting as a member of the House of Commons during the time that he shall execute, hold or enjoy any such contract, agreement or commission or any part or share thereof, or any benefit or emolument arising from the same'.

It will be noticed that the phraseology used in this section is different from that used in Section 15, Clause (1) of the Central Provinces and Berar Municipalities Act, 1922, and the decision of their Lordships in (1917) 33 TLR 383 (supra) is based upon the interpretation of the words 'execute, hold or enjoy' which do not occur in Section 15, Clause (1) of the Indian Act.

10. In that case, Major the Hon. Waldorf, a member of the Parliament, had accepted from the Government contracts to publish certain Government advertisements in his paper on payment. The applicant Charles Dyter Tranton, as a common informer, applied to recover penalties from the member for having sat and voted as a member of the House of Commons when he was disqualified from doing so. The following passage in the decision was relied upon in K. C. Sharma's case, ILR (1954) Nag 571: (AIR 1954 Nag 255) (supra):

'I will say at once that I think that the real and sufficient answer to the claim of the plaintiff in this action is that even if Government department acting directly does give an, order to a newspaper for the insertion of a Government advertisement in a particular issue of the newspaper, and the newspaper accepts and inserts the advertisement, and that is all, such a transaction is not a contract or agreement within the meaning of this legislation at all, and such casual or transient transactions are not the kind of contracts covered by these statutes, but that what are meant to be covered are contracts of a more permanent or continuing and lasting character, the holding and enjoying of which might improperly influence the action both of legislators and the Government.'

It will be observed that the case was decided in favour of the defendant as the plaintiff bad failed to prove that the contracts existed at the time when the member sat or voted as would be clear from the following passage in the judgment:

'It was conceded by plaintiff's counsel that on the authorities he must prove that at the time when the defendant either sat or voted he executed, held, or enjoyed a contract. The mere fact that he might have vacated his seat was not enough to entitle the plaintiff to recover, as the penalties do not attach for sitting or voting while disqualified; but for sitting or voting while executing, holding or enjoying a contract.'

Therefore, all that was decided in that case was that as no such contracts existed at the time when the member sat and voted in the House, he did not incur any penalty. All the same, it was observed:

'.... .the enactment refers to the case of a man having a contract under which he is to derive some future benefit from dealing with the Government, in respect of which they might control him-- as, for instance, by directing their officers not to look too closely to the sort of goods he sent in, Or the like'.

These observations imply that Section 1 of the House of Commons (Disqualification) Act, 1782, applied to contracts which were executory in nature, and not to contracts which had been fully executed.

11. Certain, observations in (1876) 1 Ex D 484 seem to support this view. In this case, the provisions in Sections 28, 52 and 53 of the Municipal Corporation Act (5 and 6 Wm. 4, c. 76) were considered. The 28th section provided that a person shall not be qualified to be a councillor during the time he had any interest in any contract with the council. The 52nd section provided for the office of the Alderman falling vacant under certain contingencies which did not include the condition given in the 28th section. The 53rd section provided for penalty being incurred for sitting without being qualified at the time of sitting. The case related to an Alderman, supplying goods to the council for cash payment. After the contracts were performed, he sat in the meeting of the council and the question was whether he incurred penalties provided by Section 53. Bramwell B. observed:

'I am by no means clear, as I said before, that the legislature intended to deal with such a case as this in this way. I think that what they had in their minds, very likely, was one of those continuing contracts, that is to say, a contract for the supply of coal for a year, or a contract to do a large piece of building, or something of that kind where a man may make a large profit if he has got friendly persons to contract with him; and I doubt very much whether the legislature intended these words to comprehend the case where there was a trifling dealing over the counter, and where the price paid for the articles was well known.'

Apparently, these observations imply that the prohibition was not against contracts of sale for cash. This is not, however, correct as earlier it is said:

'Whether the legislature intended that such contracts should or should not be within the Act is another matter, but I think if a shilling's worth of stationery were bought of an alderman there would be a contract between the corporation and that alderman. Probably if they had intended it they would have used the word 'dealing', or some such word. However, it is a contract, and, independently of any reasoning upon the matter, I think it is concluded by the case of Nicholson v. Fields, (1862) 21 LJ (Ex) 233, where a somewhat similar contract was involved. There it was a bill for lime supplied to certain commissioners. In this case it is a casual supply of candles, or some such thing.'

It is clear from these observations that so far as the language of Section 28 is concerned, contracts of cash sales were held to be covered by it. The decision in that case went against the plaintiff because section 52, which provided for the seat becoming vacant, did not include the disqualification arising from such contracts and Section 53 provided for penalty being incurred for sitting only during the period when disqualification lasted. As the defendant ceased to be disqualified after the sale was complete, he did not incur the penalty for sitting afterwards.

12. In Nell v. Longbottom, 1894-1 QB 767, the vote of a councillor in an election was challenged on the ground that he had a share or interest in a contract on behalf of the council and was thus disqualified from voting. The objection was upheld by Cave J. with the following observation;

'It appears that the appointment of chemist to the council entitles the person appointed to supply goods, in the way of his business as a chemist and druggist, to the police and to the fire brigade, and that Mr. Griffin, who held this office, had not lesigned the appointment before his election, and had after his election supplied a member of the fire brigade on behalf of the council with fourpence-worth of oil. The first answer made to this was that the contract was a very small one. That, however, is a matter into which we cannot enter, as the legislature has not entrusted us with any dispensing power, and probably considered the maxim of obsta principiis should apply to cases of this class'.

The vote given by the councillor concerned was accordingly excluded.

13. In the King v. Rowlands, 1906-2 KB 292 the question was whether a member of the Board of guardians, who had charged some commission for realizing rent on behalf of the Board, he-came disqualified to hold his seat on the Board under section 46 of the Local Government Act, 1894, which provided that 'where a member incurred a disqualification, the Board shall forthwith declare the seat to be vacant'. The contention that the disqualification ceases as soon as the amount of commission was returned by the member of the Board was repelled, and it was held that the office became vacant notwithstanding the transitory character of the disqualification. Darling J. said:

'The mischief aimed at by section 46 is to prevent persons in the position of guardians of the poor from deriving benefit from contracts which they have to control. Now, if Mr. Macmorran's argument is right, a guardian might enter into a contract of purchase or sale with the board which might very well be completely carried out in one day. He would be disqualified, but before the board could declare his office vacant the contract would have terminated, and, therefore, according to Mr. Macmorran's argument he could not be compelled to vacate his office. This operation might be repeated daily, with the result of reducing the section to a dead letter. This leads me to think that it cannot have been intended that the termination of the contract should get rid of the disqualification.'

The language of sections 15 and 22 of the Central Provinces and Berar Municipalities Act is similar to the language of section 46 of the Local Government Act, 1894, and almost identical with the wordings in Section 28 of the Public Health Act, 1894, which was interpreted in Flctcher v. Hudson, (1881) 7 QBD 611 to mean that the disqualification, resulted in the office becoming vacant.

14. In my opinion, the meaning of Section 15, Clause (1), of the Central Provinces and Berar Municipalities Act has to be found on the language used in that section, read with Section 22 of the Act. We do not see any reason to place any restricted interpretation on the word 'contract' as used in that section to cover only executory contracts. The reason for the enactment obviously is that there should be no conflict between the duty of a member of a committee and his private interest. Such conflict arises no less in the case of contracts which are executed as in the case of contracts which are executory.

In fact, as is observed in Rowlands' case, 1906-2 KB 292 (supra) in the passage quoted earlier, if the interpretation that Section 15, Clause (1), is restricted only to executory contracts is accepted, a wide door is left open for the members of the committee to take advantage of their office and to sell municipal property for cash or by auction sale to their benefit and similarly to purchase property for the municipality for cash to the detriment of the interests of the committee. As the provisions in the section are intended to prevent such conduct on the part of the member, the word 'contract' should be interpreted to mean all contracts whether executed or executory.

15. Shri Y. S. Dharmadhikari for the petitioner contends that in the case of a sale across the counter for cash or in an auction sale there is no contract at all and the property passes at once from the seller to the purchaser. This contention is not well founded. Every sale is preceded by an agreement to sell as would be apparent from the definitions given in Section 4 of the Sale of Goods Act, which is as follows:

'4. (1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part-owner and another.

(4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred'.

Thus, it is only after an agreement to sell has been arrived at that a sale takes place. In the case of a sale across the counter for cash or in an auction sale, the agreement to sell and the passing of the property in the goods sold takes place simultaneously. Nevertheless, an agreement to sell does exist in these cases also. Sub-section (1) of Section 64 of the Sale of Goods Act, which deals with sales by auction, provides that where goods are put up for sale in lots, each lot is prima facie deemed to be the subject of a separate contract of sale. This clearly shows that there is a contract of sale in the case of auction sales also, however momentary its existence may be.

16. In view of what I have said above, the decisions in ILR 1953 Nag 245 : (AIR 1953 Nag 125) (supra) and ILR (1954) Nag 571 : (AIR 1954 Nag 255) (supra) do not appear to lay down the correct law--I say so with great respect to the learned Judges who decided the two cases in so far as they restrict the meaning of the word 'contract' used in Clause (1) of Section 15 of the Act to executory contracts only. In our opinion, that clause applies to executed contracts as well.

17. It is true that the use of the conjunction 'while' between the two clauses in item (1) of Section 15 of the Act shows that the disqualification lasts only so long as the interest of the member in the contract lasts. Accordingly, in the case of a sale by auction, the disqualification lasts only for a moment. However, Section 22 of the Act provides that as soon as any president, vice-president or member becomes subject to any disqualification under Section 15, he forthwith ceases to be president, vice-president or member. The effect of the section is automatic and follows without any order from any authority.

The existence of interest in a contract by itself produces the effect Therefore, if a member has an interest in a contract, however brief the period of such interest may be, he ceases to be a member, and the status of his membership cannot be revived by the termination of the interest in the contract. Accordingly, the petitioner, who had an interest in the contract which was entered into by his father with the Municipal Committee, ceased to be a member as soon as that contract was entered into. To that extent, the order of the State Government declaring the petitioner to be disqualified for the office of member is correct.

18. The impugned order is, however, incorrect in so far as it declares the petitioner disqualified to hold the office of vice-president. It was assumed by the State Government in the show cause notice given to the petitioner as also in the reply given by the petitioner that the auction sale of the calf took place after the petitioner had assumed the office of member as well as that o vice-president. However, it was not disputed before 113 that the petitioner became a vice-president after the auction sale of the calf.

Under Section 22 (2) of the Act, the disqualification incurred was not therefore material so far as the petitioner's office as vice-president is concerned. A person, who is not a member, can be elected as a vice-president of the committee. The disqualification which was incurred by the petitioner as a member on account of the auction sale of the calf, did not exist at the time when he was elected as vice-president. After assuming that office, he has not done anything to incur a disqualification. The order of the State Government was based on a wrong assumption that the disqualification was incurred after the petitioner assumed the office of the vice-president.

19. In the result, I would allow the petition partly. The order of the State Government dated 10-10-1959 should be quashed only so far as it relates to the removal of the petitioner from the office of the vice-president of the Municipal Committee, Piparia. Under the circumstances of the case, I would direct that the costs of the petition shall be borne by the parties as incurred.

Pandey, J.

20. I agree and would like to add a few words. Clause (1) of Section 15 of the relevant Act creates a disqualification for the purpose of election, selection or nomination as a member enduring only so long as the candidate owns any share of interest in any contract made with, by or on behalf of the Municipal Committee concerned. It is urged that a sale of goods by auction is not a contract at all. Further, the contention is that, if such a contract for purchase or supply of goods is fully executed on both sides, it ceases to be a disqualification for election and would not, for that reason, attract Section 22 (2) of the Act also.

An auction is only a manner of selling goods and, when goods are thus sold, a contract is undoubtedly formed: Section 64 of the Sale of Goods Act. In such a case, the seller impliedly warrants that he is entitled to sell the goods and that there is no defect in title to the goods and further undertakes to give possession of the goods to the buyer on payment of the price. The seller further warrants that the buyer would enjoy quiet possession of the goods which would not be disturbed by him (seller). A sale of goods by auction must, therefore, be regarded as a contract of sale.

Now election is effected by a series of steps starting with the nomination and ending with the announcement of the election. If a contract is made with the Committee at any stage during the process of election commencing from the nomination and ending with the announcement of the election, there would be a disqualification for election and would, for that reason, attract Section 22 (2). It is true that since the office of the petitioner as vice-president will be continued after our orders, he will be deemed to be a member under Section 18 (4) of the Act, but this is a consequence of the special provisions of the Act.

BY THE COURT

21. In the result, thepetition is partly allowed. The order of theState Government dated 10-10-1959 is quashedonly so far as it relates to the removal of thepetitioner from the office of the vice-president orthe Municipal Committee, Piparia. We direct that the costs of the petition shall be borne by,the parties as incurred. The outstanding amount of the security deposit shall be refunded to thepetitioner.